SPECIAL INFORMATION FOR 2008
U.S. Military Officer Compensation Exemption Increased (Act 160 of 2007). U.S. military officer compensation exemption increased from $6,000 to $9,000. Effective January 1, 2007.
Low Income Tax Relief Tables (Act 195 of 2007). Beginning with tax year 2007 the Low Income Tax Table fully exempts from Arkansas tax those with income below the federal poverty level. Additional tax relief is provided for taxpayers earning less than 133% of the federal poverty level income. The new tables are indexed for inflation for automatic adjustments in future years. Effective January 1, 2007.
Arkansas Extension to Correspond with Federal Extension (Act 369 of 2007). This act increases the Arkansas maximum extension for individual income tax returns from 120 days to 180 days. Effective January 1, 2007.
New Set Off Added (Act 553 of 2007). This act allows county tax collectors and treasurers to be treated as setoff agencies. Effective January 1, 2007.
New Check Off Added (Act 695 of 2007).This act creates the Newborn Umbilical Cord Blood Bank for postnatal tissue and fluid. The program provides for the Arkansas Commission for the Newborn Umbilical Cord Blood Initiative and provides for certain funding mechanisms including an income tax check off. Effective January 1, 2007.
3% Tax Levied on Winnings Paid by Arkansas Electronic Games of Skill (Act 732 of 2007). Pursuant to Act 732 of 2007 Arkansas will levy a 3% flat tax on winnings from electronic games of skill. Winnings taxed at 3% are not included as income to the payee, nor is the tax withheld included on the payee’s tax return. Effective January 1, 2007.
Internal Revenue Code 179 Adopted (Act 613 of 2007). Arkansas adopted IRC §179 as in effect on January 1, 2007, thus allowing greater dollar limits and phase out thresholds. The legislation became effective when the Arkansas CFO certified that additional funding is available to replace the revenue reduction for fiscal years 2008 and 2009. The maximum deduction allowed for property placed in service during the tax year is now $115,000. The deduction is decreased “dollar for dollar” for property over $460,000, and no deduction is allowed for property over $575,000. (Arkansas has not yet adopted the most recent federal changes.) See page 22 for more information.
The Delta Geotourism Incentive Act (Act 518 of 2007). This act allows an income tax credit to persons and entities investing in geotourism-supporting businesses that attract out of state visitors and serve to preserve, perpetuate, interpret, and present the rich culture, history, and natural resources of the Lower Mississippi River Delta Community. An income tax credit equal to 25% of the investment will be allowed. The maximum credit to be allowed per tax year is $25,000. Unused credit may be carried forward for 5 consecutive tax years following the year in which the credit is earned.
Income Tax Technical Corrections Act (Act 218 of 2007). Act 218 readopts numerous Internal Revenue Code Sections. Refer to www.arkansas.gov/dfa for details.
Reminder: Some Federal Tax Changes Not Adopted By Arkansas
Arkansas has not adopted the following federal tax laws recently enacted by Congress: Economic Stimulus Act; Heroes Earnings Assistance and Relief Act; Heartland, Habitat, Harvest, and Horticulture Act; Housing Assistance Tax Act and the Emergency Economic Stabilization Act. Income tax provisions not adopted include, but are not limited to, the following:
- IRC §108 and §1017 suspending 5-year ownership and use period for excluding gain on sale of principal residence while homeowner is serving in Peace Corps or Military Intelligence
- IRC §108 allowing up to $2 million forgiveness of debt for person’s residence to be excluded from taxable income
- IRC §163 extending deduction of qualified mortgage insurance premiums (PMI) as interest expense
- IRC §68 limiting the itemized deduction phaseout to 1%
- IRC §179 allowing additional depreciation expensing up to $250,000 (See Page 22 for more details)
MILITARY PERSONNEL
Treatment of Combat Pay Clarified (Act 29 of 2005)
This act adopts Sections 112 and 692 of the Internal Revenue Code as in effect on January 1, 2005 to clarify that combat zone compensation is exempt from Arkansas individual income tax and that the income of a member of the armed forces is exempt in the year of the person’s death.
This act applies to tax years beginning on or after January 1, 2005.
The Servicemembers Civil Relief Act of 2003
Section 510 - Income taxes
(a) Deferral of Tax - Upon notice to the Internal Revenue Service or the tax authority of a state or a political subdivision of a state, the collection of income tax on the income of a servicemember falling due before or during military service shall be deferred for a period not more than 180 days after termination of or release from military service, if a service member’s ability to pay such income tax is materially affected by military service.
(b) Accrual of Interest or Penalty - No interest or penalty shall accrue for the period of deferment by reason of nonpayment on any amount of tax deferred under this section.
(c) Statute of Limitations - The running of a statute of limitations against the collection of tax deferred under this section, by seizure or otherwise, shall be suspended for the period of military service of the servicemember and for an additional period of 270 days thereafter.
Section 511 - Residence for tax purposes
(a) Residence or Domicile - A servicemember shall neither lose nor acquire a residence or domicile for purposes of taxation with respect to the person, personal property, or income of the servicemember by reason of being absent or present in any tax jurisdiction of the United States solely in compliance with military orders.
(b) Military Service Compensation - Compensation of a servicemember for military service shall not be deemed to be income for services performed or from sources within a tax jurisdiction of the United States if the servicemember is not a resident or domiciliary of the jurisdiction in which the servicemember is serving in compliance with military orders.
(d) Increase of Tax Liability - A tax jurisdiction may not use the military compensation of a nonresident servicemember to increase the tax liability imposed on other income earned by the nonresident servicemember or spouse.
The Military Family Tax Relief Act of 2003
The provisions of this act which include the sale of your principal residence, deduction for overnight travel expenses of National Guard and Reserve members, and exclusion from income of certain benefits, has not been adopted by the Arkansas Legislature.
Reminders:For military personnel stationed in Arkansas with Home of Record other than Arkansas: DO NOT include your military wages on your Arkansas return. Your military income is reported to your state of residency (HOR) only and not used in the calculation of your Arkansas tax liability. Your non-military wages, if any, must be included on Line 8.
U.S. Military retirement DOES NOT qualify as U.S. Military compensation, and IS NOT eligible for the $9,000 military exemption on Lines 9A or 9B. U.S. Military retirement is eligible for the $6,000 retirement exemption and should be listed on Lines 18A and/or 18B.
DEFINITIONS
GROSS INCOME.Gross income is any and all income (before deductions) other than the kinds of income specifically described as exempt from tax on pages 11 and 12 “Income Exempt from Tax.”
Exception: The $6,000 exemption on retirement income and the $9,000 exemption on military income as described on page 12 are included in gross income.
DOMICILE.This is the place you intend to have as your permanent home and the place you intend to return to whenever you are away. You can have only one domicile. Your domicile does not change until you move to a new location which you intend to make your permanent home. If you move to a new location but intend to stay there only for a limited time (no matter how long), your domicile does not change. This also applies if you are working in a foreign country.
FULL YEAR RESIDENT. You are a full year resident if you lived in Arkansas all of tax year 2008, or if you have maintained a domicile or Home of Record in Arkansas during the tax year.
NONRESIDENT.You are a nonresident if you did not make your domicile in Arkansas.
PART-YEAR RESIDENT. You are a part-year resident if you established a domicile in Arkansas or moved out of the State during the calendar year of 2008.
MILITARY PERSONNEL.If Arkansas is your Home of Record (HOR) and you are stationed outside the State of Arkansas, you are still required to file an AR1000 reporting all of your income, including U.S. Military Compensation. If you are stationed in Arkansas and your Home of Record is another state, Arkansas does not tax your U.S. Military Compensation.
U.S. Military compensation includes wages received from the Army, Navy, Air Force, Marine Corps, Coast Guard, National Guard, Reserve Units, and the U.S. Public Health Service.
Arkansas does tax income from Arkansas sources received by you or your spouse while you are stationed in Arkansas, including pay from non-appropriated funds; (i.e., exchange, clubs, commissary, etc). This Arkansas income must be listed in Column C of Form AR1000NR and taxed based upon your Arkansas percentage of total tax liability.
DEPENDENTS. You may claim as a dependent any person who received over half of his or her support from you, earned less than $3,500 in gross income, and was your:
| Child | Stepchild | Mother | Father | Grandparent | Brother |
| Sister | Grandchild | Stepbrother | Stepsister | Stepmother | Stepfather |
| Mother-In-Law | Father-In-Law | Brother-In-Law | Sister-In-Law | Son-In-Law | Daughter-In-Law |
Or, if related by blood: Uncle, Aunt, Nephew, Niece or, an individual (other than your spouse) who, for the taxable year of the taxpayer, had the same principal place of abode as the taxpayer and was a member of the taxpayer’s household. The term “dependent” includes a foster child if the child had as his principal place of abode the home of the taxpayer and was a member of the taxpayer’s household for the taxpayer’s entire tax year.
The term “dependent” does not apply to anyone who is a citizen or subject of a foreign country UNLESS that person is a resident of Mexico or Canada.
If your child/stepchild was under age 19 at the end of the year, the $3,500 gross income limitation does not apply. Your child/stepchild may have earned any amount of income and still be your dependent if the other dependency requirements in this section were met.
If your child/stepchild was a student under age 24 at the end of the calendar year, the $3,500 gross income limitation does not apply. The other requirements in this section still must be met.
To qualify as a student, your child/stepchild must have been a full-time student for five (5) months during the calendar year at a qualified school, as defined by the Internal Revenue Service.
If your dependent died during the tax year, you may claim the full amount of tax credit for the dependent on your tax return regardless of when the death occurred during the year.
Arkansas has adopted Internal Revenue Code §151(c)(6) regarding the tax treatment of kidnapped children.
WHO MUST FILE A TAX RETURN
| FULL-YEAR RESIDENTS (Use Form AR1000) | ||
| If your MARITAL STATUS is: | and your FILING STATUS is: | you must file if GROSS INCOME* is at least |
| Single (Including divorced and legally separated) | Single |
$10,507 |
| Head of ahousehold | $14,936 | |
| Married | Married Filing Joint (1 or less dependents) (2 or more dependents) |
$17,717 |
| Married Filing Separately | $3,999 | |
| Widowed in 2006 or 2007, and not remarried in 2008 | Qualifying Widow(er) with dependent child | $14,936 |
*Gross income is any and all income (before deductions) other than the kinds of income specifically described as exempt from tax on pages 11 and 12 "Income Exempt from Tax." Exception: The $6,000 exemption on retirement income and the $9,000 exemption on military income as described on page 12 are included in gross income. If your gross income was less than the amount shown in the last column for your filing status, you are not required to file a return. However, you must file a return to claim any refund due |
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WHEN TO FILE
- You can file your Calendar Year Tax Return any time after December 31, 2008, but NO LATER THAN APRIL 15, 2009, (unless an extension has been granted).
- If you file a Fiscal Year Tax Return, your return is due NO LATER THAN three and onehalf (3 ½) months following the close of the income year.
NOTE: The date of the postmark stamped by the U.S. Postal Service is the date you filed your return.
- If the due date of your return falls on a Saturday, Sunday, or legal holiday, the return shall be considered timely filed if it is postmarked on the next business day which is not a Saturday, Sunday, or legal holiday.
- Statute of Limitations – Refunds. An amended return or verified claim for refund of an overpayment of any state tax for which the taxpayer is required to file a return must be filed by the taxpayer within three (3) years from the time the return was filed or two (2) years from the time the tax was paid, whichever is later.
IF YOU NEED MORE TIME
If you request an extension of time to file your federal income tax return (by filing Federal Form 4868 with the IRS) you are entitled to receive the same extension on your Arkansas income tax return. The federal automatic extension extends the deadline to file until October 15th. In order to receive the extension for state purposes, when you file your return check the box on the face of the Arkansas return indicating you filed a federal extension.
The Department no longer requires that a copy of Federal Form 4868 be attached to your state tax return. When the return is complete and ready to file, simply check the box on the face of the return.
NOTE: If the box on the front of the AR1000 is not checked, you will not receive credit for your federal extension.
If you do not file a federal extension, you can file an Arkansas extension using Form AR1055 before the filing due date of April 15th. Inability to pay is not a valid reason to request an Arkansas extension. Send your request to:
Individual Income Tax Section
ATTN: Extension
P.O. Box 3628
Little Rock, AR 72203-3628
NOTE: The maximum extension that will be granted to an individual on an AR1055 is one hundred and eighty (180) days, extending the due date until October 15th.
Attach a copy of your approved AR1055 extension to the face of your tax return WHEN YOU FILE. IF YOU DO NOT ATTACH YOUR EXTENSION, YOUR RETURN WILL BE CONSIDERED DELINQUENT AND PENALTIES WILL BE ASSESSED.
Payments made on extension should be made on Form AR1000ES, Voucher 5.
INCOME EXEMPT FROM TAX
NOTE: List exempt income on AR4, Part III and include the total on AR1000, Line 56.
- Money you received from a life insurance policy because of the death of the person who was insured is exempt from tax.
NOTE: You must include as taxable income any interest payments made to you from the insurer (the insurance company that issued the policy). - Money you received from life insurance, an endowment, or a private annuity contract for which you paid the premiums is allowed cost recovery pursuant to Internal Revenue Code §72.
- Amounts you received as child support payments are exempt.
- Gifts, inheritances, bequests, or devises are exempt from tax.
- Scholarships, grants, and fellowships are taxed pursuant to Internal Revenue Code §117. Stipends are taxed in their entirety. For additional information on scholarships, fellowships, and stipends see instructions for Line 21.
- Interest you received from direct United States obligations, its possessions, the State of Arkansas, or any political subdivision of the State of Arkansas is exempt from tax. Obligations include bonds and other evidence of debt issued pursuant to a government unit's borrowing power. (Interest received on tax refunds is not exempt income, because it did not result from a debt issued by the United States, the State of Arkansas, or any political subdivision of the State of Arkansas.) Interest from government securities paid to individuals through a mutual fund is exempt from tax.
- Social Security benefits, VA benefits, Workers' Compensation, Unemployment Compensation, Railroad Retirement benefits and related supplemental benefits are exempt from tax.
- The rental value of a home or the housing allowance paid to a duly ordained or licensed minister of a recognized church is exempt to the extent that it was used to rent or provide a home. The rental value of a home furnished to a minister includes utilities furnished to the minister as part of compensation. The housing allowance paid to a minister includes an allowance for utilities paid to the minister as part of compensation to the extent it is to be used to furnish utilities in the home.
- Disability Income MAY BE exempt from tax pursuant to Internal Revenue Code §104.
- The first $9,000 of U.S. Military Compensation is exempt from tax.
- If you received income from an employer sponsored retirement plan, including disability retirement, that is not exempt under IRC §104, the first $6,000 is exempt from tax. For tax years 2003 and later, if you contributed after-tax dollars to your plan, you are allowed to recover your cost (investment) in your retirement plan in accordance with Internal Revenue Code §72. Then the first $6,000 of the balance is exempt from tax. (If you received income from military retirement, you may adjust your figures if the payment includes Survivor's Benefit Payments. The amount of adjustment must be listed on the income statement, and supporting documentation must be submitted with the return.)
- If you received an IRA distribution after reaching the age of fifty-nine and one-half (59 1/2), the first $6,000 is exempt from tax. Your IRA distribution may be adjusted for nondeductible IRA contributions, if any, by completing Federal Form 8606 and attaching it to your Arkansas return. Premature distributions made on account of the participant's death or disability also qualify for the exemption. All other premature distributions or early withdrawals including, but not limited to, those taken for medical expenses, higher education expenses or a first-time home purchase do not qualify for the exemption.
A surviving spouse qualifies for the exemption; however he/she is limited to a single $6,000 exemption.
NOTE: The total exemptions from all plans described under 11 and 12 cannot exceed $6,000 per taxpayer, not including recovery of cost.
FILING STATUS
DETERMINE YOUR FILING STATUS
BOX 1. Filing Status 1 (Single)
Check this box if you are SINGLE or UNMARRIED and DO NOT qualify as HEAD OF HOUSEHOLD. (Read the instructions for BOX 3 to determine if you qualify for HEAD OF HOUSEHOLD.)
BOX 2. Filing Status 2 (Married Filing Joint)
Check this box if you were MARRIED and are filing jointly. IF YOU ARE FILING A JOINT RETURN, YOU MUST ADD BOTH SPOUSES' INCOME TOGETHER. Enter the total amount in column A on Lines 8 through 22 under "Your/Joint Income".
NOTE: If you are married, filing on the same form, and using different last names, separate the last names by using a slash.
EXAMPLE: John Q. and Mary M. Doe/Smith, or Mary M. and John Q. Smith/Doe Be sure the placement of the last name matches placement of the first name. (You must be legally married to file in this manner.)
MARRIED COUPLES CHOOSING THE BEST FILING STATUS. If you and your spouse had separate incomes, you might save money by figuring your tax separately using one of the following two methods. Use the method that suits you best.
METHOD A. List your income separately under Column A ("Your Income"). List your spouse's income separately under Column B ("Spouse's Income"). Figure your tax separately and then add your taxes together. See instructions for Married Filing Separately on the Same Return, Box 4.
If you use Method A, your result will be either a COMBINED REFUND or a COMBINED TAX DUE.
METHOD B. File separate individual tax returns. See instructions for Married Filing Separately on Different Returns, Box 5.
If you use Method B, one of you may owe tax and the other may get a refund. The tax due must be paid with the proper tax return and the refund will be due on the other return. YOU MAY NOT OFFSET ONE AGAINST THE OTHER.
BOX 3. Filing Status 3 (Head of Household)
To file as Head of Household you must have been unmarried or legally separated on December 31, 2008 and meet either 1 or 2 below. The term "Unmarried" includes certain married persons who live apart, as discussed at the end of this section.
- You paid over half the cost of keeping a home for the entire year that was the main home of your parent whom you can claim as a dependent. Your parent did not have to live with you in your home.
OR
- You paid over half the cost of keeping a home in which you lived, and in which one of the following also lived, for more than six (6) months of the year (temporary absences, such as vacation or school, are counted as time lived in the home):
- Your unmarried child, grandchild, greatgrandchild, adopted child or stepchild. This child did not have to be your dependent, but your foster child must have been your dependent.
- Your married child, grandchild, adopted child or stepchild. This child must have been your dependent.
- Any other relative whom you could claim as a dependent.
MARRIED PERSONS WHO LIVED APART. Even if you were not divorced or legally separated in 2008, you may be considered unmarried and file as Head of Household. See Internal Revenue Service instructions for Head of Household to determine if you qualify.
BOX 4. Filing Status 4 (Married Filing Separately on the Same Return)
Check this box if you were married and are filing SEPARATELY ON THE SAME TAX RETURN. This method of tax computation may reduce your tax liability if both spouses had income. The result will be either a combined refund or a combined tax due.
IF ONE SPOUSE HAD A TOTAL NEGATIVE INCOME, YOU MUST FILE MARRIED FILING JOINTLY.
BOX 5. Filing Status 5 (Married Filing Separately on Different Returns)
Check this box if you were married and are filing separate tax returns.
BOX 6. Filing Status 6 [Qualifying Widow(er)]
Check this box if you are a QUALIFYING WIDOW(ER).
You are eligible to file as a QUALIFYING WIDOW(ER) if your spouse died in 2006 or 2007 and you meet each of the following tests:
- You were entitled to file MARRIED FILING JOINTLY or MARRIED FILING SEPARATELY ON THE SAME RETURN with your spouse for the year your spouse died. It does not matter whether you actually filed a joint return.
- You did not remarry before the end of 2008.
- You had a child, stepchild, adopted child, or foster child who qualified as your dependent for the year.
- You paid more than half the cost of keeping a home, which was the main home of that child for the entire year except for temporary absences.
PERSONAL TAX CREDITS
LINE 7A. Each taxpayer and spouse is entitled to one personal tax credit. You can claim additional Personal Tax Credits if you can answer "Yes" to any of these questions:
Is your filing status Head of Household or Qualifying Widow(er)?
On January 1, 2009, were you age 65 or over?
On December 31, 2008, were you deaf?
On December 31, 2008, were you blind?
Check the box or boxes that apply to you and/or your spouse. You CANNOT claim any of these credits for your children or dependents.
Blindness is defined as being unable to tell light from darkness, having eyesight in the better eye not exceeding 20/200 with corrective lens, or having a field of vision limited to an angle of 20 degrees.
You can claim the Deaf Credit only if the average loss in speech frequencies (500 to 2000 Hertz) in the better ear is 86 decibels, I.S.O., or worse.
Any taxpayer age 65 and over not claiming a retirement income exemption on Line 18 is eligible for an additional $23 (per taxpayer) tax credit. Check the box(es) marked "65 Special".
Add the number of boxes you checked on Line 7A. Write the total in the box provided. Multiply the number by $23 and write amount in space provided.
LINE 7B. List the name(s) of your dependent(s) in the space provided. DO NOT INCLUDE YOURSELF AND/OR YOUR SPOUSE. The individual(s) you can claim as dependent(s) are described on Page 9.
Add the number of boxes you checked on Line 7B. Write the total in the box provided. Multiply the number by $23 and write that amount in the space provided.
LINE 7C. If one or more of your dependents were developmentally disabled, enter his/her name(s) on the line. Multiply $500 by number of developmentally disabled dependents. Enter the total
NOTE: You must attach a cer tified AR1000RC5 to your return if this is the first year you claim the Developmentally Disabled Individual Credit.
A certified AR1000RC5 must be filed with your tax return every five (5) years. If credit was received on a prior year's return, do not file another AR1000RC5 until the Individual Income Tax Section notifies you.
LINE 7D. Total the tax credits from Lines 7A, 7B, and 7C. Enter the total on this line and on Line 36.
INCOME
FULL YEAR RESIDENTS. If your filing status is Married Filing Separately on the Same Return, both Column A and Column B will be used. Write your income in Column A and your spouse's income in Column B. For all other filing statuses, write your income in Column A only.
PART-YEAR AND NONRESIDENTS. Complete Column A and Column B of the AR1000NR as if you were a full year resident. List all of your income from all sources for the entire year in these two columns.
List in Column C the total combined income (for both spouses) earned while Arkansas residents and/or income derived from Arkansas sources.
Use all three columns to calculate the amount of Arkansas tax liability. The total tax must be computed on the income totals in Columns A and B. After all allowable tax credits have been subtracted from the total tax, prorate the remaining balance. See instructions for Lines 44A, 44B, 44C, and 44D.
PART-YEAR RESIDENTS AND NONRESIDENTS MUST ATTACH A COPY OF YOUR FEDERAL RETURN, OR YOUR ARKANSAS RETURN WILL NOT BE PROCESSED.
Round all amounts to the nearest dollar. (For example, if your Form W-2 shows $10,897.50, round to $10,898. If your Form W-2 shows $10,897.49, round to $10,897.)
Staple the state copy of each of your W- 2(s) and 1099-R(s) to the left margin of the front of the return.
LINE 8. Add the wages, salaries, tips, etc. reported on your W-2(s). Enter the total on this line. Attach W-2(s).
NOTE: Enter U. S. Military Compensation on Line 9. Enter U.S. Military Retirement on Line 18.
LINE 9A. If you had U.S. Military Compensation, enter gross income in space provided. You are entitled to a $9,000 exemption from your gross income. The balance is taxable. Attach W-2(s).
Filing Status 2 (Mar ried Filing Joint): If you and your spouse both had U.S. Military Compensation, enter your total gross income in the appropriate space provided on Line 9A. You and your spouse are each entitled to an exemption from your respective gross incomes.
LINE 9B. (Filing Status 4 Only) If your spouse had U.S. Military Compensation, enter gross income in the space provided. Your spouse is entitled to a $9,000 exemption from his/her gross income. The balance is taxable. Attach W-2(s).
HOME OF RECORD OTHER THAN ARKANSAS: DO NOT INCLUDE YOUR MILITARY WAGES. Your income is reported to your state of residence only and not used in the calculation of your Arkansas tax liability.
Your non-military wages, if any, must be included on Line 8.
LINE 10. If you are a duly ordained or licensed minister, you received a housing allowance from your church, and you do not file a Federal Schedule C or C-EZ, enter your gross compensation from the ministry less rental value of your home. The balance is subject to tax. Attach W-2(s) if not using Federal Schedule C or C-EZ.
LINE 11. If you received interest from bank deposits, notes, mortgages, corporation bonds, savings and loan association deposits, and credit union deposits, enter all interest received or credited to your account during the year. If the total is over $1,500, complete and attach Form AR4.
LINE 12. If you received dividends and other distributions, enter amounts received as dividends from stocks in any corporation. If the total is over $1,500, complete and attach Form AR4.
LINE 13. Enter alimony or separate maintenance received as the result of a court order.
LINE 14. If you had business or professional income and filed a Federal Schedule C or CEZ, enter the total dollar amount(s) of net income (or loss) from your Federal Schedule C or C-EZ. If you did not file a Federal Schedule C or C-EZ, submit a similar schedule and enter the net income (or loss). If you filed a Federal Schedule C or C-EZ, attach it to your return.
Business income may not be split between you and your spouse unless a partnership is legally established. Report Partnership Income on Form AR1050 and attach K-1(s) for each partner.
Include on Line 21, Other Income, any federal/state depreciation differences.
LINE 15. If you had gains or losses from the sale of real estate, stocks or bonds, or gains or losses from capital assets from Partnerships, S Corporations, or Fiduciaries, enter your taxable share. Adjust the amount of gain or loss for any federal/state depreciation differences.
If, after the netting process, you had a capital gain or loss reported on the Federal Schedule D or on Form 1040/1040A, use Arkansas Form AR1000D to determine the taxable amount to enter on AR1000/ AR1000NR, Line 15. Attach Federal Schedule D and Form AR1000D to your return.
The amount of capital loss that can be deducted after offsetting capital gains is limited to $3,000 ($1,500 per taxpayer for filing Status 4 or 5). If your capital loss was more than the yearly limit on capital loss deductions, you can carry over the unused part to later years until used up.
The gain on the sale of your personal residence is exempt up to $250,000 per taxpayer ($500,000 for married couples filing on the same return). The property must, during the 5 year period ending on the day of sale, be owned and used by the taxpayer(s) as the principal residence for periods aggregating 2 years or more.
LINE 16. Enter the ordinary gain or (loss) from Part II of Federal Form 4797. Adjust for any differences in Arkansas and federal depreciation. The capital loss limit does not apply. Attach Federal Form 4797.
LINE 17. Use this line to report taxable lump-sum distributions, annuities, and regular IRA distributions. Include early withdrawal of IRA distributions on this line. List only the amount of withdrawal and attach the Federal Schedule 5329 showing the tax on premature distribution. Also, enter ten percent (10%) of the tax from the Federal Schedule 5329, Part I and Part II, on Line 34. If you received a distribution which does not qualify for the Lump- Sum Distribution Averaging Schedule (AR1000TD), list the total distribution received in 2008. (See AR1000TD to determine if you qualify to use the averaging method.) Attach 1099-R(s).
Premature distributions are amounts you withdrew from your IRA, deferred compensation, or thrift savings plans before you were either age 59 ½ or disabled. Rollovers of premature distributions are tax exempt.
McFadden and Maples Claimants: If a claim was filed on your behalf under McFadden v. Weiss or Maples v. Weiss your Arkansas basis (cost of contributions) in your retirement plan has changed. Refer to page 24 to calculate the Arkansas basis in your retirement plan.
LINE 18A. If you had income from an employment- related pension plan or a qualified IRA distribution, enter the gross amount(s) from Box 1 of your 1099-R(s) in the space provided. Enter the federal taxable amount from Box 2a of your 1099-R(s) in the space provided. If Box 2a is blank, use the Simplified Method Worksheet in the Federal 1040 Instruction Booklet to calculate the taxable amount of your distribution. You are entitled to a $6,000 exemption from the taxable amount; the balance is taxable to Arkansas. Enter the balance on Line 18A, Column A. Attach 1099-R(s).
FILING STATUS 2 (Married Filing Joint) ONLY: If you and your spouse both had income from a retirement plan and/or qualified IRA distribution, enter the combined gross income amount from Box 1 of your 1099-R(s). Enter the combined federal taxable amount from Box 2a of your 1099-R(s). If Box 2a is blank, use the Simplified Method Worksheet in the Federal 1040 Instruction Booklet to calculate the taxable amount of your distribution. Both you and your spouse are entitled to a $6,000 exemption from your respective taxable retirement plan income; the balance is taxable to Arkansas. Enter the balance on Line 18A. Attach 1099-R(s).
LINE 18B. FILING STATUS 4 (Married Filing Separately on the Same Return) ONLY: If your spouse had income from an employment related pension plan or a qualified IRA distribution, enter the gross income from Box 1 of his or her 1099-R(s). Enter the federal taxable amount from Box 2a of his or her 1099-R(s). If Box 2a is blank, use the Simplified Method Worksheet in the Federal 1040 Instruction Booklet to calculate the taxable amount of his or her distribution. Your spouse is entitled to a $6,000 exemption from the taxable amount; the balance is taxable to Arkansas. Enter the balance on Line 18B. Attach 1099-R(s).
You are eligible for the $6,000 exemption for retirement or disability benefits provided the distribution was from public or private employment-related retirement systems, plans, or programs. (The recipient need not be retired.) The method of funding is irrelevant. The exemption may be taken from either lump-sum or installment payments. The early withdrawal penalty may be applicable even though the exemption is granted.
If you received an IRA distribution after reaching the age of fifty-nine and one-half (59 1/2), the first $6,000 is exempt from tax. Premature distributions made on account of the participant's death or disability also qualify for the exemption. All other premature distributions or early withdrawals including, but not limited to, those taken for medical expenses, higher education expenses, or a first-time home purchase do not qualify for the exemption.
Note: If you made nondeductible contributions to your IRA, enter taxable amount from Federal Form 8606 in the space provided. Attach Federal Form 8606.
LINE 19. If you had income from rents, royalties, estates or trusts, profits (whether received or not) from partnerships, fiduciaries, small business corporations, etc., enter the amounts as reported on your Federal Schedule E. If you are filing a return for a taxable year that is not the same as the annual accounting period of your partnership or trust, report your distributive share(s) of net profits in the accounting period that ends in your taxable year. Attach Federal Schedule E.
Nonresident beneficiaries pay tax only on Arkansas income.
LINE 20. If you had farm income, enter the amount reported on your Federal Schedule F. Farm income may not be split between you and your spouse unless a partnership is legally established. Partnership income must be reported on Form AR1050, with K-1(s) for each partner. Attach Federal Schedule F.
LINE 21. Enter all taxable income for which no other place is provided on the return. Attach a statement explaining the source and amount of the income. Examples are: prizes, awards, TV and radio contest winnings (cash or merchandise), and gambling winnings. You must report reimbursement of medical expenses from a previous year if you itemized deductions in that year and it reduced your tax.
Include amounts recovered on bad debts that you deducted in an earlier year.
Include any adjustment that arises from federal/state depreciation differences.
If you had a net operating loss (NOL) in an earlier year to carry forward to 2008, enter it as a negative amount on this line. Attach a statement showing how you calculated the amount of loss and the year the loss occurred. A net operating loss may be carried forward for five (5) years.
Scholarships, fellowships, and stipends: A scholarship or fellowship is exempt from tax only if:
- You are a candidate for a degree at an educational institution, and
- The grant is a qualified scholarship or fellowship.
A qualified scholarship or fellowship is any amount you received as a scholarship or fellowship grant that was used under the terms of the grant for:
- Tuition and fees required for enrollment, or
- Fees, books, supplies and equipment required for the course(s) at the educational institution. (These items must be required of all students in that course.)
Foreign students who are exempt from federal taxes because of a tax treaty must file and pay tax on all income including non-qualified scholarship or fellowship income.
Stipends are taxable.
LINE 22. Add Lines 8 through 21 and enter total in the appropriate columns on this line. This is your Total Income.
ADJUSTMENTS
LINE 23. To claim the Texarkana exemption, you must file a return and report all Arkansas income you received during the year. Enter the exempt income on Line 23. Attach Form AR-TX.
Form AR-TX is supplied by your employer.
The Form AR-TX is not required for non wage income such as interest, dividends, Schedule C (sole proprietor), Schedule F (farm), Schedule E (rents, royalties, partnerships, etc.) or retirement. Additional information may be required for verification if an adjustment for these types of income is allowed.
NOTE: Taxpayers who claim this exemption must file using their street address in Texarkana, Arkansas or Texarkana, Texas. If you use a Post Office Box, this exemption will not be allowed.
If you lived within the city limits of Texarkana, Arkansas, you are allowed a full exemption from Arkansas income taxation. Part-year Texarkana residents claim the exemption only on income earned while a resident of Texarkana, Arkansas.
If you lived within the city limits of Texarkana, Texas, you are allowed to deduct the income you earned in the city limits of Texarkana, Arkansas. All other Arkansas income is taxable to you.
LINE 24. If you made contributions to a tuition savings account established under the Arkansas Tax Deferred Tuition Savings Program enter the amount here. Contributions to plans established in states other than Arkansas are not deductible. The deductible contribution cannot exceed $5,000 per taxpayer per tax year. Qualified withdrawals from a tuition savings account established under the Arkansas Tax Deferred Tuition Savings Program or a tax-deferred tuition savings program established by another state will be exempt from Arkansas income tax with respect to the designated beneficiary's income.
LINE 25. If you have other allowable adjustments, use Form AR1000ADJ and include the total on this line. Attach Form AR1000ADJ.
LINE 26. Add Lines 23, 24, and 25 and enter total on this line. This is your Total Adjustments.
LINE 27. Subtract the total on Line 26, Total Adjustments, from the total on Line 22, Total Income. Enter balance on this line. This is your Adjusted Gross Income (AGI).
TAX COMPUTATION
LINE 28. Enter the amounts from Lines 27(A) and (B), page AR1/NR1 (Adjusted Gross Income) on this line.
LINE 29. SELECT THE PROPER TAX TABLE and check the appropriate box. You will be in one of the following categories:
- You qualify for a Low Income Table, or
- You must use the Regular Tax Table
See tax tables and qualifications for each table on pages 26-30.
If you use an exclusion for military compensation, employer sponsored pension income, or a qualified IRA distribution, you do not qualify for a Low Income Tax Table. You may elect NOT TO USE the exclusion(s) to which you are entitled and use a Low Income Tax Table if you fall within the income limits.
Caution: If you qualify to use a Low Income Tax Table, enter zero (0) on Line 29A. (The Standard Deduction is already built into the table.)
If you use the regular tax table, enter the larger of your itemized deductions or your Standard Deduction on Line 29.
Itemized Deductions: To compute your itemized deductions, complete Form AR3. Make sure that your total itemized deductions exceed the Standard Deduction. (For Form AR3 instructions see pages 18-19 of this booklet.)
NOTE: If you are filing Status 4 or 5 and one spouse itemizes, then both spouses must itemize.
Standard Deduction: The Standard Deduction for your filing status is the amount shown below. (If the amount on Line 28 is less than the Standard Deduction, enter the amount from Line 28 on Line 29.
| Filing Status | Standard Deduction |
| 1- Single | $2,000 |
| 2- Married Filing Joint | $4,000 |
| 3- Head of Household | $2,000 |
| 4- Married Filing Separately on Same Return | $2,000 each |
| 5- Married Filing Separately on Different Returns | $2,000 |
| 6- Qualifying Widow(er) | $2,000 |
NOTE: The $2,000 Standard Deduction does not apply to taxpayer's dependent(s).
LINE 30. Subtract Line 29 from Line 28. This is your Net Taxable Income.
LINE 31. Using the appropriate tax table locate the tax for your income and enter here.
LINE 32. Add Lines 31(A) and 31(B) and enter the total.
LINE 33. If you received a lump-sum (total) distribution from a qualified retirement plan during 2008, you may be eligible to use the averaging method to figure some of your tax at a lower rate. Read the instructions on the back of Form AR1000TD to determine if you are eligible to use this method. If so, complete Form AR1000TD and enter amount here. Attach Form AR1000TD.
LINE 34. Taxpayers subject to IRA or employer qualified retirement plan penalties and tax on their federal return are subject to penalties and tax on their state return. Enter ten percent (10%) of the federal penalty amount from Part I of Federal Form 5329. Be sure to enter total distribution(s) from Part I, Form 5329, on Line 17 or 18, page AR1/NR1.
If you are subject to a penalty on a distribution from a Coverdell Education Savings Account, include ten percent (10%) of the federal penalty amount from Part II of Federal Form 5329 on this line. Be sure to include the taxable amount of the Coverdell Education Savings Account distribution on Line 21, page AR1/NR1 (Other Income).
LINE 35. Add Lines 32 through 34 and enter the total.
TAX CREDITS
LINE 36. Enter the total personal tax credits from Line 7D.
LINE 37. Enter the amount of allowable State Political Contributions Credit(s) on this line. The allowable credit(s) cannot exceed $50 for Filing Status 1, 3, 5 or 6 or $100 total for Filing Status 2 or 4. Attach Form AR1800.
LINE 38. If you are an Arkansas resident and included income on your Arkansas Return that was also taxed by another state, you may claim a credit for the income tax portion of taxes paid to the other state on that income.
The income tax withheld from your wages by another state is NOT the amount of tax you owed the other state. For that reason, YOU MUST ATTACH TO YOUR ARKANSAS RETURN A SIGNED COPY OF THE TAX RETURN(S) YOU FILED WITH THE OTHER STATE(S). Enter the amount of net income tax liability to the other state(s).
NOTE: This credit cannot exceed the Arkansas Income Tax on the same income and cannot exceed the total tax you owe Arkansas.
Nonresidents cannot claim this credit on their Arkansas Return. Part-year residents will not be allowed this credit unless they continue to have taxable income from another state and the other state income is included as taxable income in Column C of the AR1000NR.
A tax credit is allowed for a resident shareholder's pro rata share of any net income tax paid by a Sub S Corporation to a state that does not recognize Sub S Corporation status.
The State of Mississippi enacted a special tax that applies exclusively to gambling winnings. This tax is separate and distinct from Mississippi's income tax. As such, an Arkansas taxpayer cannot claim a credit against his/her Arkansas income tax liability for payment of the gambling winnings tax to the State of Mississippi.
LINE 39. The Child Care Credit allowed is twenty percent (20%) of the amount allowed on your federal return. A copy of Federal Form 2441, "Credit for Child and Dependent Care Expenses," or a copy of your 1040A, Schedule 2, must be attached to your Arkansas return. (If this credit is for Approved Early Childhood Credit, see instructions for Line 48.)
LINE 40. The Adoption Expense Credit allowed is twenty percent (20%) of the amount allowed on your federal return. A copy of Federal Form 8839 must be attached to your Arkansas return.
LINE 41. Enter the allowable Phenylketonuria Disorder Credit. Attach Form AR1113.
LINE 42. From the Business and Incentives Tax Credits Summary Schedule (AR1020BIC), enter the total allowable credits. Some credits available are listed below:
Affordable Neighborhood Housing
Biotechnology Development
Capital Development Corporation
County & Regional Industrial Development
Delta Geotourism Development
Economic Development
Emerging Energy Technology
Employer-Provided Early Childhood Program
Enterprise Zone Program
Equipment Donation or Sale Below Cost
Equity Investment
Family Savings Initiative
Job Creation
Low Income Housing
Manufacturing Investment Payroll Income
Private Wetland & Riparian ZonePublic Roads Improvement
Rice Straw
Tourism Project Development
Tuition Reimbursement
Venture Capital Investment
Waste Reduction & Recycling Equipment
Water Resource Conservation
Workforce Training
Youth Apprenticeship
NOTE: Recent legislation amended, increased, or extended some of the provisions for Business and Incentive Tax Credits. For details on tax credits, refer to the Business and Incentive Tax Credit Package which contains forms for each credit. Business Tax Credit forms may be obtained from the Department of Finance and Administration, Tax Credits, Box 1272, Little Rock, AR 72203, (501) 682-7106.
LINE 43. Add Lines 36 through 42 and enter the total on Line 43.
LINE 44. Subtract Line 43 from Line 35. This is your Net Tax. If Line 43 is greater than Line 35, enter zero (0).
PRORATION
IF FILING A FULL YEAR RESIDENT RETURN, go to instructions for Line 45. The instructions for Line 44A through Line 44D apply only to nonresidents and part-year residents
NONRESIDENTS AND PART-YEAR RESIDENTS ONLY, read the following instructions to determine your correct Arkansas Tax Liability. Attach a complete copy of your federal return.
LINE 44A. Enter total income from Line 27, Column C.
LINE 44B. Enter total of Columns A and B from Line 27.
LINE 44C. Divide amount on Line 44A by amount on Line 44B to arrive at your Arkansas percentage of income. Unless your percentage is less than 1%, enter your percentage as a whole number, rounding the percentage to the nearest whole percent.
If your percentage is less than 1%: Do not round to one (1) or zero (0). Carry the number out to six places to the right of the decimal.
Example: $2,500/$525,000 = .00476190476 (Enter as 00.476190)
LINE 44D. Multiply amount on Line 44 by percentage on Line 44C for Arkansas apportioned tax liability.
PAYMENTS
LINE 45. Enter Arkansas Tax withheld from your W-2(s). You have already paid this amount of tax during the year. If you have MORE THAN ONE W- 2, be sure to add the Arkansas Income Tax withheld from all W-2(s). Enter the total withheld.
IF YOU AND YOUR SPOUSE ARE FILING ON THE SAME RETURN, add the Arkansas State Income Tax withheld from all your W-2(s). Enter the combined total withheld.
If you did not receive (or lost) your W-2(s) and Arkansas tax was withheld from your income, you should take the following steps IN THE ORDER LISTED BELOW:
- Ask your employer for copies of your W-2(s). If you cannot obtain them from your employer you should
- Contact the Social Security Administration at (800) 772-1213. Only if you cannot obtain your W-2(s) from SSA you may
- Complete Federal Form 4852 and attach a copy of your final pay stub to support your amounts.
CAUTION: You WILL NOT receive credit for tax withheld or receive a tax refund, unless you attach CORRECT AND LEGIBLE W-2(s) or other approved documentation to your tax return.
DO NOT include FICA, Federal Income Tax, or tax paid to another state on Line 45.
DO NOT correct a W-2 yourself. Your employer must issue you a corrected W-2.
LINE 46. If you made an Estimated Declaration and paid estimated tax payments on 2008 income OTHER THAN wages, salaries, tips, etc., write the amounts paid in this space. The only amounts to enter here are payments you made on a 2008 Declaration of Estimated Income Tax (includes January 15, 2009 installment and/or credit brought forward from 2007 tax return).
DO NOT include PENALTIES OR INTEREST as part of the amount paid.
If you and your spouse filed a JOINT declaration and you and your spouse choose to file your annual returns on separate forms this year, payments made under the joint declaration of estimate will be credited to the primary filer.
If you are filing prior year tax returns past the due date of the tax return, the refund/ overpayment from those tax returns cannot be carried forward as estimated tax.
LINE 47. If you filed an extension request with the state and paid tax with your request, enter the amount paid.
LINE 48. Enter the APPROVED early childhood credit (20% of the Federal Child Care Credit) for individuals with a dependent child placed in an APPROVED Child Care Facility while the parent or guardian worked or pursued employment. (Facility must be approved by the Arkansas Department of Education as having an appropriate Early Childhood Program as defined by Arkansas law.) Enter the certification number and attach Federal Form 2441 or 1040A, Schedule 2 and Certification Form AR1000EC. Contact your child care facility for Form AR1000EC.
LINE 49. Add the amounts on Lines 45, 46, 47 and 48. This is your TOTAL TAX PAID.
REFUND OR TAX DUE
LINE 50. If Line 49 is more than Line 44 on the AR1000 or Line 44D on the AR1000NR, you overpaid your tax. Write the difference on Line 50. If you want a refund only, skip Lines 51 and 52 and enter the amount of your refund on Line 53.
LINE 51. You can apply part or all of the tax you OVERPAID in 2008 to your tax in 2009. Enter the amount you would like to have carried forward. The overpayment will be applied directly to your 2009 Estimated Account. If you wish to apply only part of Line 50 to pay 2009 tax, you will be issued a refund for the balance of your overpayment.
NOTE: The amount you carry over to pay 2009 taxes will only be credited to the primary filer. It cannot be divided between the primary filer and spouse.
LINE 52. If you wish to contribute a portion or all of your overpayment to one or more of the programs listed below, complete schedule AR1000-CO and enter total amount of your donation. Attach Schedule AR1000-CO after the AR2/NR2.
Arkansas Disaster Relief Program
U.S. Olympic Committee Program
Arkansas Schools for the Blind and Deaf
Baby Sharon's Children's Catastrophic Illness Program
Organ Donor's Awareness Education Program
Area Agencies on Aging Program
Military Family Relief Program
Newborn Umbilical Cord Blood Initiative
LINE 53. Subtract Lines 51 and 52 from Line 50. This is the amount of your Refund
The Director is allowed 90 days from the return due date or the date the return was filed, whichever occurs later, to refund an overpayment of tax without interest (Act 262 of 2005).
SET OFF REFUNDS
If you, your spouse, or former spouse owes a debt to one of the agencies below, all or part of your refund is subject to being withheld to satisfy the debt. You will receive a letter advising which agency has claimed your refund.
Department of Finance and Administration
AR colleges, universities, and technical institutes
Office of Child Support Enforcement
Department of Human Services
Department of Higher Education
Arkansas circuit, county, district, or city courts
Employee Benefits Division of DFA
Any housing authority
Office of Personnel Management of DFA
County tax collectors or treasurers
It is the agency's responsibility to refund any set off amount paid to the agency in error.
If you owe a debt for Arkansas income tax, your federal refund may be captured to satisfy your state income tax debt.
NOTICE TO MARRIED TAXPAYERS: If only one of the married taxpayers owes the debt, the taxpayer who is not liable can avoid having his/her refund applied to the debt if both taxpayers file Status 5, Married Filing Separately on Different Returns.
LINE 54. If Line 44 of the AR1000 or Line 44D of the AR1000NR is more than Line 49, you owe additional tax. Subtract Line 49 from Line 44 of the AR1000 or Line 44D of the AR1000NR. Enter amount on Line 54. This is the TAX YOU OWE.
If you owe additional tax in excess of $1,000, and failed to make a declaration of Estimated Tax, a penalty of ten percent (10%) will be assessed. See instructions for Lines 55A and 55B for more information.
LINE 55A and 55B. Enter the exception number from Part 3 of the AR2210, or the computed penalty from Line 18 of AR2210 in the appropriate box.
Form AR2210 must be attached and the exception number entered in box 55A to claim any exclusion from the Underestimate Penalty.
LINE 55C. Add Lines 54 and 55B. Enter total on this line.
LINE 56. Enter the total amount from Form AR4, Part III in the space provided.
Your tax return will not be legal and cannot be processed unless you SIGN IT. Write in the DATE. If you and your spouse are filing a joint tax return or filing separately on the same return, both of you must sign it.
If someone else prepares your return, that person must sign and complete the Preparer Information section on page AR2/NR2. If you prepare your own return, DO NOT use this section.
PAYMENT INFORMATION
Attach a check or money order to your return. Write your Social Security Number on the check or money order, and make your check payable to the Department of Finance and Administration. Mail on or before April 15, 2009.
Taxpayers may pay their tax due by credit card. Credit card payments may be made by calling 1-800-2PAY-TAXSM (1-800-272-9829), or by visiting www.officialpayments.com and clicking on the "Payment Center" link.
Both options will be processed by Official Payments Corporation, a private credit card payment services provider. A convenience fee will be charged to your credit card for the use of this service. The State of Arkansas does not receive this fee. You will be informed of the exact amount of the fee before you complete your transaction. After you complete your transaction you will be given a confirmation number to keep with your records.
NOTE: Do not send currency or coin by mail.
PENALTIES & INTEREST
If you owe additional tax, you must mail your tax return by April 15, 2009. Any return not postmarked by April 15, 2009 (unless you have an extension) will be delinquent. A penalty of one percent (1%) per month for failure to pay and five percent (5%) per month for failure to file, a maximum of thirty-five percent (35%) will be assessed on the amount of tax due. Interest of ten percent (10%) per year will also be assessed on any additional tax due, calculated from the original due date to the date you paid the tax due.
An extension to file is not an extension to pay. If you have not paid the amount due by the original due date you will be subject to a failure to pay penalty of one percent (1%) per month of the unpaid balance.
In addition to any other penalties assessed, a penalty of $500 will be assessed, if any taxpayer files what purports to be a return, but the return does not contain information on which the correctness of the return may be judged, and such conduct is due to a position which is frivolous or an effort to delay or impede the administration of any State law.
Keeping Your Data Protected